A JPMorgan Chase & Co. asset-management business must face a lawsuit by a unit of Assured Guaranty Ltd., New York state’s highest court ruled, upholding an appeals court’s ruling allowing the suit to proceed.
J.P. Morgan Investment Management was sued in 2008 and accused of mismanaging the investment portfolio of a special purpose entity named Orkney Re II Plc whose obligations were guaranteed by Assured Guaranty.
The Court of Appeals in Albany today upheld a ruling by an appellate court in Manhattan that common-law causes of action for breach of fiduciary duty and gross negligence brought by Assured Guaranty were not preempted by state securities laws. A lower court had dismissed the complaint at the request of the defendants.
“The purpose of the Martin Act is not impaired by private common-law actions that have a legal basis independent of the statute because proceedings by the attorney general and private actions further the same goal -- combating fraud and deception in securities transactions,” Judge Victoria Graffeo wrote in the ruling.
JPMorgan will continue to defend itself against the claims in the suit, Doug Morris, a spokesman for the New York-based bank, said in an e-mail.
“We believe that we acted appropriately at all times with respect to the management of the client’s accounts,” Morris said. “This is a decision related to the adequacy of the pleadings and not to the merits of the claims.”
The case is Assured Guaranty Ltd. v J.P. Morgan Investment Management Inc., 603755/2008, New York state Supreme Court (Manhattan).